If you are starting the home buying process, you are probably already encountering a lot of terminology and jargon that you don’t completely understand. Even if you are up with all of the terms and even if you’ve purchased a home before, there still might be things that you don’t know about buying a home. Here are five things that you should always do before buying a home that you might not have heard of before:
Improve your credit score. While you by no means have to have a perfect credit score in order to be approved for a mortgage, the better your credit score is, the better your interest rate is bound to be, and therefore, the less you’re going to pay over your home loan’s term. You can take steps right now to improve your credit score, like paying down your loans and having any mistakes or incorrect information removed.
Determine how much home you can afford. A very general guideline for figuring out how much home you can afford is to pick a house whose monthly payment will be less than 28-31% of your monthly income. This is generally a good ratio to use when factoring in all your other monthly expenses.
Factor in your closing costs and down payment. Too often, buyers only think about the final cost of the home and don’t realize that they will need to make a significant down payment and pay closing costs when it is finally time to actually buy the home. Factoring in these costs into the total cost of buying a home will give you a more realistic picture of what you can afford.
Make sure your savings account is robust. Lenders like Home Sure Lending will look at your savings account as an indicator of your overall financial health. A robust savings account gives you money to fall back on should you ever lose your monthly income and need to find another job or have some other emergency that would otherwise jeopardize your financial state.
Get a preapproval. Being preapproved isn’t always necessary when buying a home, but it can instill confidence in a seller if you have already passed through the first stage of getting your home loan and are therefore more likely to actually be approved when it comes time to get your mortgage.